Keynes predicted during the Great Depression that as humans increased their productivity an hour of labor would produce more and more, and we would be able to work less and take care of our material needs. In fact he predicted that his grandchildren would see productivity increase eight-fold from his time and we would work 15 hour work weeks.

Despite the fact that we don’t work 15 hour work weeks (a discussion for another time), labor productivity has indeed increased eight-fold. Automation and free trade have made us significantly more productive. We produce more than ever and are constantly setting manufacturing output records even though manufacturing employment has plummeted. Our GDP growth has slowed, but it still continues to grow and our GDP and GDP per capita are both at record highs.

Today is Manufacturing Day, so let’s recognize America’s world-class manufacturing sector and factory workers

So if we are more productive than ever, have more money than ever, have more money per person than ever, why do we work so hard, and why are so many people in poverty?

The answer is because of the fact we are so much more productive, labor is worth less. Meaning that for the majority of us who sell labor (i.e. work for a living) we earn less than we would before, and conversely those of us who sell goods or services produced or provided by labor earn more because the cost of producing those goods and services have been reduced.

Therefore, the country faces a paradox: the country is worth more, but most of its people are worth less. How can a country ensure all of its citizens have the basics to survive and stay out of poverty if the market says they are worth less than the poverty line? Lyndon Baines Johnson attempted to solve this problem with his Great Society programs. Some have tried to artificially raise the minimum wage to ensure full time workers are above the poverty line. Others have tried to incentivize employers to hire employees to realize full employment. However, one of the most interesting suggestions to tackle this problem has been a basic income.

The premise for basic income is simple enough everyone gets a small sum of money enough to pay for their basic needs. This income would be provided by the government and paid for by some form of tax. However, the details, the implementation, the rules, and even the morality of it all are another matter entirely.

Cons of Basic Income

First and foremost it’s expensive. $10,000 a year is usually the go to amount per adult. There are approximately 235 million adults (above 18 years old) in the United States. That cost comes out to $2.35 trillion a year.

For comparison the entire mandatory spending budget is currently about $2.45 trillion dollars and that includes social security, Medicare, labor benefits, and food assistance.

On top of that initial $2.35 trillion mark most plans also advocate for additional money for children. There are about 74 million children in the US and if each mother received an additional $2,000 for each child that would be an additional $148 billion.

Which would mean basic income would cost about $2.5 trillion each year. In order to pay for it you would have to raise taxes and that would make everything more expensive.

Another source of contention is the effect it would have on work. Americans have a strong dislike for freeloaders and handouts. Americans much rather other people and themselves work for what they earn. Giving people money for nothing, simply put, rubs Americans the wrong way.

Furthermore, introducing $2.5 trillion to the economy might have distorting effects. If your landlord knows you can afford an extra $200 a month in rent why wouldn’t they simply charge you more? And it wouldn’t just be your landlord, it would be everyone inflation would run rampant.

From the left giving everyone the same amount of money regardless of income is not very progressive. Paying a person who earned $1,000,000 the same $10,000 as someone who earned $1,000 hardly seems fair or efficient.

Benefits of a Basic Income

Basic income can trace its origins back centuries, but the main reason for its introduction is generally the same: to reduce poverty and it symptoms in a pragmatic way. Famed and respected conservative Nobel Laureate economist Milton Friedman proposed a negative income tax (a version of a basic income) for the following reasons:


  • To replace the current bloated welfare system with a simple cash transfer
    • Less administrative costs if you don’t need to determine eligibility
  • Give people the freedom to “vote with their dollars” and remove the paternalistic welfare system
    • Rather than money for food and housing, just giving money allows people to make their own choices essentially making them more “free”
  • Remove the disincentive to earn more because of the accompanying reduction of benefits
    • Everyone gets the basic income and no benefit drops due to making too much
  • Allows people to pursue work or charity that the free market doesn’t compensate well or at all
    • Some work like childrearing and serving food in the soup kitchen don’t earn money, a basic income allows those people to be compensated
  • Equality and fairness in its requirements and disbursement. No more deserving or undeserving everyone is treated exactly the same.
    • By removing requirements it no longer benefits one group more or excludes another, everyone gets the exact same benefit

In the spirit of Keynes’s optimistic prediction of the future a basic income redistributes the increased productivity of the modern world to meet the basic needs of each of countries citizens. It ensures that everyone even if automation or trade reduces or even eliminates the value of their labor they can still purchase the basics they need to survive.

Furthermore, by giving every citizen an amount of money to keep them out of poverty, it expands the market by giving more purchasing power to the people who historically spend the most of their money in the free market, the poor and middle class. Increasing demand causes business to hire more and produce more creating jobs and increasing profits, everyone wins.

Almost all of the money given as a basic income will be used to purchase goods and services in each citizen’s local market. Rent, food, gas, clothing are generally all purchased locally especially by lower to middle income Americans that allows dying towns and cities to have a constant capital infusion that will encourage business to grow and hire. Small towns in rural areas and even some suburbs would have a guaranteed source of money each and every year. No longer would they feel left behind by the economic policies instilled by the “coastal elites”.

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